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Multi-million pound plans to upgrade the UK intelligence community’s secure communications system have been shelved in a move heavily criticised by a parliamentary oversight committee.

The project to give key government officials speedy access to intelligence on terrorism - dubbed Scope - was abandoned when only partially completed because of unspecified technical obstacles, and only after millions had already been spent. MPs reacted furiously to the decision in an annual report from the Intelligence and Security Committee, the parliamentary committee that oversees the operation of Britain's intelligence agencies.

The nature of the technical problems is still under investigation by MPs. The cost of shelving the project and options for a replacement system is also unclear.

The Guardianreports that Scope was designed to move security intelligence into the 21st century with the replacement of a systems for distributing reports by paper with an electronic system. The first phase of the project, which allowed the intelligence agencies (GCHQ, MI5 and MI6) to exchange intelligence electronically did go live after a two year delay. The same information that once took 12 hours to obtain now takes only 15 minutes.

The second, more ambitious, phase of the system was to extend the network to officials in around ten key government departments, including Revenue and Customs and the Serious Organised Crime Agency. This phase of the project would also had given defence officials and military commanders electronic access to intelligence reports.

News that this phase of the scheme had been shelved came in a delayed report from the Intelligence and Security Committee, covering the years 2007 and 2008, and published on Thursday. Copies of the report - alongside the government's response - can be found here. The section on Scope is on page 40 of the report and concludes by expressing the frustration of MPs with the failure of the project.

We have consistently reported concerns about SCOPE and are appalled that Phase II of the system – on which tens of millions of pounds have been spent – has now had to be scrapped. We sincerely hope that lessons have been learnt from this failure and that they will be used when plans for the future are being drawn up. We also expect the development of any replacement capability to be subject to more stringent controls, and greater management and financial accountability, from the outset. We will be investigating the reasons for the serious failure of this important project, and will report on the matter in the forthcoming year.

Government plans to spend hundreds of millions of pounds on a massive central silo UK communications data under the Interception Modernisation Programme (IMP) are unaffected by the decision to scrap Scope. The failure of such a high-profile project does, however, raise further questions over the government's ability to roll out such an ambitious (not to say controversial) project.

The Guardian reports that MI5's budget received a 40 per cent boost during the 2006-07 financial year in the wake of 7 July 2005 suicide bombings in London. GCHQ, the signals intelligence agency, plans to recruit an extra 1,500 people over the next three years, bringing its workforce to 6,000. The extra staff are needed to handle an increased workload, including supporting British troops stationed overseas, especially those fighting in Afghanistan. ®